The continued downward pressure on wages, which has led to the lowest growth rates in more than 50 years, is not a cyclical downturn but is rapidly becoming a permanent feature of the Australian economy.

While this outlook was not explicitly spelled out, it was the central conclusion to be drawn from a speech delivered by the governor of the Reserve Bank of Australia, Philip Lowe, to a group of business economists in Sydney on Tuesday evening.

Lowe began his remarks by expressing something of the bewilderment which characterises central bankers and economic authorities around the world in the post-global-financial crisis environment. They confront a situation in which all their models of how the capitalist economy is supposed to work—supplying rising wages and living standards—have broken down.

Lowe began by recalling that in an address to the Australian Business Economists annual dinner five years ago he had addressed the subject of “What is Normal?”

“Five years on, we are still searching to understand what is normal,” he said. Around the world, real income growth has been unusually slow in many countries and not surprisingly “these households, including many here in Australia, wonder whether this slow growth in incomes is now the new normal.”

Lowe left the question open but the content of his speech made clear that the decline in wages is going to continue…